Benefits of Splitting and Passing Credit Card Fees
If you're a B2B company heavily reliant on credit card payments, you understand the impact of fees on your revenue. By passing on or splitting credit card fees with your customers, you can cover this cost while minimizing the impact on your bottom line.
One of B2B companies' primary methods of accepting payments is by credit card. If your company is one of them, you’re familiar with its pros and cons. One of its most inconvenient cons is the fees.
Regardless of the size of your company, you know that these fees take a big chunk of your revenue. However, the larger the revenue volume, the higher the cost of these fees. Solutions to reduce the impact of credit card fees include designating a budget to cover their cost to splitting them with customers.
Here we will explore the latter option. Discover the benefits of splitting credit card fees with your clients, saving operational costs, and maintaining your bottom line when you accept credit cards.
Why Should You Split Credit Card Fees With Your Customers
There is a good chance that your company already has a special budget to cover the cost of credit card fees. But you can save it. By splitting or passing on credit card fees with your customers, you can reduce the impact of transaction fees on your bottom line.
This strategy can save you tens or even hundreds of thousands in fees, although this figure depends on your overall income. I.e., if your company's annual revenue is over $100 million, you could save over $100,000 in fees every month. If your annual turnover is around $5 million, you can recover $100,000 in fees as quickly as nine months.
But what if your company does not have a budget assigned for credit card fees? There are thousands of dollars in fee costs that need to be contemplated and are being absorbed from the company's revenue. It's time to curb this unnecessary spending and take steps that, instead of reducing your money, help you increase it.
How to Split Credit Card Fees With Your Customers
Subtracting a part of your customer's payment to cover a fee for using the credit card as a payment method is a huge inconvenience. These are ways you can get rid of these fees, which will benefit you and your customers:
Passing the Total Fee Amount
One way to eliminate credit card fees when receiving payments is to pass them on to your customers. This way, the customer absorbs the fee, and your profit remains intact. It is advisable to warn your customers about this fee to avoid friction and misunderstandings that can fracture or terminate relationships.
Not many companies pass the fees to customers because, for both merchants and customers, covering the cost of credit card fees is not an attractive option. This strategy is mainly used by companies that do not receive credit card payments frequently or customers who prefer other payment methods.
To carry out this option, it is necessary to have a payment processor that allows you to modify fees based on the payment method.
If your company receives credit card payments frequently, you can suggest splitting the fee 50-50 with your customer. This measure reduces the revenue impact on your company without fully shifting it onto your customers. This helps to avoid friction in customer relationships and helps keep the additional benefits of credit card payments (mileage, points, loyalty program, etc.) viable for the customer.
Providing More Efficient Payment Rails
Absorbing or passing on fees to customers is not the only solution. These fees result from the system on which credit cards are based. The right payment platform can teach customers to change their paradigms and improve their payment behavior.
Paystand’s Software-as-a-Service approach helps your company change how payments are done. Its subscription-based format charges a monthly fee that allows customers to pay with methods like ACH, eCheck and direct bank-to-bank payments, not just credit cards.
In addition, thanks to the Paystand Bank Network, any payments made through it are zero-fee. It gives you access to real-time fund transfers and is the easiest, safest way to send and receive money.
Discover the secrets to reducing credit card fees and boosting your revenue! Download our ebook, "Your Guide to Credit Card Fees and How to Eliminate Them," and unlock valuable strategies for your company.